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JOHN NAPOLITANO JOHNSON & CONWAY, LLP JUNE 29, 2009 Association of Environmental Authorities.

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Presentation on theme: "JOHN NAPOLITANO JOHNSON & CONWAY, LLP JUNE 29, 2009 Association of Environmental Authorities."— Presentation transcript:

1 JOHN NAPOLITANO JOHNSON & CONWAY, LLP JUNE 29, 2009 Association of Environmental Authorities

2 Construction Law Update Jen-Electric vs. County of Essex, 197 NJ 627 (2009) More Bid Protests on the Way

3 Alternate Titles Did the Supreme Court Open Pandora’s Box? Jen-Electric – Is it Limited to its Facts? Good, Now I Can Pay for My Kid’s College

4 The Issue Does the provisions of NJSA 40A:11-13 limit the standing of those who can challenge a bid specification in a public contract to a prospective bidder only? NJSA 40A:11-13(e) states in pertinent part, “Any prospective bidder who wishes to challenge a bid specification shall file such challenge in writing with the contracting agent no less than three business days prior to the opening of the bids. Challenges filed after that time shall be considered void and having no impact on the contracting unit or the award of the contract.”

5 General Facts/History The County of Essex was seeking bids for infrastructure improvements along Central Avenue in Newark. The specification included a named manufacturer who was represented by a single distributor. Despite several attempts to revise the specification to appease Jen- Electric, including “or equal” language or “prequalify alternates” and two rounds of bidding, Jen-Electric still maintained the specifications were illegal and accused the County of bid rigging in the papers to the Court. Prior to the receipt of the second round of bids, Jen-Electric file suit alleging the specifications were improper.

6 Original Court Decision The Trial Court dismissed the Jen-Electric’s complaint finding that Jen-Electric was not a prospective bidder therefore pursuant to NJSA 40A:11-13(e), Jen-Electric lacked “standing to challenge the specification. The Appellate Division upheld the Trial Court’s findings.

7 What is “Standing” “ Standing requires that a litigant have a sufficient stake and real adverseness with respect to the subject matter of the litigation,” In re New Jersey Board of Utilities, 299 NJ Super 554. In bid protest cases the Courts have held the challenger must be a taxpayer or a bidder to the project. In order to challenge a successful bidder, the bidder must be in opposition to legally receive the bid. (See Interstate Waste Removal Co., Inc. vs. the Board of Commissioners of the City of Bordentown, 140 NJ Super 65.) Standing requires a significant interest in the outcome.

8 Question on Appeal The question to the Supreme Court was, did Jen-Electric, Inc., not being a bidder or potential bidder on the project, have standing to challenge the bid specification, or does NJSA 40A:11-13(e) limit standing to potential bidders only? The Supreme Court held that 40A:11-13(e) did not limit who could challenge a bid specification, but acts as a statute of limitations requiring timely challenges to a specification. Jen-Electric, based upon the traditional rules of standing, had sufficient interest to challenge the bid specification. The Court did not rule on the sufficiency of the specifications.

9 What Does This Really Mean? Did the Court open the flood gates so every unhappy supplier whose product was not specified can now file a lawsuit to challenge a project specification? The Court tried to limit this fear by saying, “We underscore the very limited nature of our ruling. Plaintiff here was an active, indeed proactive, participant in the bidding process and the majority of its concerns addressed core principals of public contracting.” However, the dissent by Justice Hoens points out “as a practical matter, there is nothing in the majority’s analysis that limits the right of any potential supplier, however large or small, to commence a challenge to bid specification.

10 What Can Be Done to Protect Yourself? The use of performance type specifications instead of listing specific manufacturer's piece of equipment (This may not be practical.) Use of multiple approved vendors – Jen-Electric case only listed one Requiring prequalification of substituted material is barred by NJAC 5:34-9.2(d) “Under no circumstances shall specifications require any form of pre-approved or pre-qualification of an equivalent product before submission of bids”

11 Pending Legislation Assembly, No. 3698, Senate, 2782 Assembly, No. 3424 Assembly, No. 436 Senate, No. 770 Assembly, No. 2561 Senate, No. 2957

12 Synopsis AEA’s Position A EA has objected to this bill since it requires the owner to award based upon a pre-determined ranking of the alternatives which is set forth in the bid specifications. It restricts the ability of Authorities to maximize the use of alternatives in repair of infrastructure or mechanical situations. The AEA has worked with the sponsor in an attempt to modify the bill to protect the AEA members and still address the sponsor’s concerns. Assembly, No. 3698, Senate, No. 2782 P rovides for base and alternative bids for certain public contracts; requires contracting unit to specify basis for determining lowest responsible bid and criteria for selection of alternate bids.

13 Synopsis AEA’s Position T he AEA seeks to modify the bill to allow the contracting entity to determine if it will accept a letter of credit. Assembly, No. 3424 A uthorizes, at the discretion of the bidder, irrevocable letter of credit as performance guarantee under the “Local Public Contracts Law.”

14 Synopsis AEA’s Position A EA opposes this bill since it does not protect against the opportunity of price manipulation between suppliers and contractors. In addition, the bill increases paperwork and responsibility of the owner with no benefit to the public. While AEA recognizes increases in commodity pricing is a concern, it believes this bill should be limited to specific public projects, those where asphalt concrete work exceeds 40% of the contract work. Assembly, No. 436 P ermits price adjustments in local public contracts for asphalt cement and fuel.

15 Synopsis AEA’s Position A EA has opposed this bill since it requires all contracting entities to use a QPA for purchasing. In most Authorities purchasing is a collaborative effort between the Authority staff and its professionals and the requirement of a QPA will not necessarily add any benefit, only additional expense. This is on the Governor’s desk. Senate, No. 770 R edefines role and qualifications of purchasing agent in “Local Public Contracts Law.” T his bill is on the Governor’s desk.

16 Synopsis Conclusion T his bill was passed by the Assembly and the Senate but was vetoed by the Governor because of the efforts of groups like the AEA who put forth well-reasoned objections to the bill. Assembly, No. 2561 – A Success Story R equires certain public contract bid advertisements to contain certified cost estimates or estimate ranges of projected contract costs and specifies grounds for rejection of all bids.

17 Synopsis AEA’s Position T his has just been introduced and no position has been taken. Senate, No. 2961 P rohibits imposition of sewerage service connection fee upon municipalities and boards of education.

18 End John Napolitano Johnson & Conway, LLP 18 Sycamore Avenue Ho-Ho-Kus, NJ June 29, 2009

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